Comment by lvzw
20 hours ago
Memory fab build out times are years not months. The existing ones already run 24/7. If these companies could pull more supply out of thin air they would, but they cannot.
20 hours ago
Memory fab build out times are years not months. The existing ones already run 24/7. If these companies could pull more supply out of thin air they would, but they cannot.
Would they?
Cartels aren't known for massively increasing production to satisfy all demand. Far from it I'd say, they're more likely to expand supply to such a level that they can still reap massive profits. Very few countries/companies have the knowhow and willingness to be able to build more.
OPEC is a perfect example of this behaviour. They set hearly production goals to keep prices high. Or the Quebec Maple Syrup Producers organization that limits the amount of syrup a farmer can produce and sell in a year to keep prices high.
> Quebec Maple Syrup Producers organization
Can you just not join the organization?
Maple trees are living things and have a right to reproduce, you can't fault a bird for shitting maple seeds all over my farm planting maple trees everywhere.
It looks like you're forced to participate by law once you sell over a certain volume.
> Backed by the Canadian civil courts, the federation has the monopoly for selling Quebecois maple syrup on the wholesale market, and for exporting it outside the province. Producers are only allowed to sell independently cans of less than five litres or 5kg to visitors to their farm. https://www.bbc.com/news/business-35028380
I saw a documentary(forgot the name, sorry) about that that said, no you can't choose not to join. I forgot if it was about this organization but it was about maple production in Canada where a farmer wanted to do their own thing and they were intimidated and all sorts of nasty things happen to them because they didn't think the org was just and wanted to sell freely. Very interesting documentary and an eye opener that even farmer unions can act like organized crime when there's money involved.
> you can't fault a bird for shitting maple seeds all over my farm planting maple trees everywhere.
If only building a ram FAB was that easy :).
The best hope is that cxmt gets going quicker than expected and is able to satisfy a decent chunk of the Chinese demand for RAM which would - in theory - reduce the demand for ram from the few other producers.
You're correct in theory. I'm just not sure we have a cartel situation. Micron is a US company, and it controls 25% of the global market. I see no evidence that they nor SK hynix nor Samsung are intentionally limiting production.
I do see people arguing, "they had years to increase production - why didn't they?" They've been remarkably candid about this: because RAM production has been losing them money in the past. Because they don't have a cartel, prices were on the floor. Investing in more production would have been corporate suicide.
Even now, there is considerable risk that the bubble will burst, and all this investment in new production will be flushed down the toilet. RAM production is a brutal business.
> OPEC is a perfect example of this behaviour.
It really is. First thing I searched for in the thread.
OPEC's aim isn't to keep prices as high as possible. If they go too high, people will start buying electric cars, investing in renewable energy, etc. Basically they want to make oil as expensive as possible while preventing it from getting so expensive that it's disruptive.
OPEC's goal is as much profit as possible. They're not thinking in the short term but long term. If as much possible means over the span of multiple centuries then that's what they're going for.
I think we're in agreement here. I don't think memory manufacturers are interested in a market disruption even though profits are incredibly high for a few years. Make it too profitable for too long and others will arise but keep the supply at a steady pace with decent margins and they will remain the only ones on the block because of massive upfront cost.
China is, to my knowledge, the only country that has so far had the willingness to seriously invest. Not necessarily for profits but for independence reasons. I don't see many (or any really) other countries following suit.
Can you list out the precise "cartel" company, their supply chains and the board of directors, their financial and political ties?
Lot of unsubstantiated claims with low fidelity meme evidence
There's details in the class action lawsuit
https://stream-ai.s3.us-west-1.amazonaws.com/class-action-co...
https://en.wikipedia.org/wiki/DRAM_industry_price_fixing
> Cartels aren't known for massively increasing production to satisfy all demand.
Don't worry they will leave money on the table and lobby for protectionism when china comes and eats their lunch.
But are the memory chip producers acting like a cartel? In the past they have not. When there was a shortage, they increased production as rapidly as they could build the new fabs, crashing the price of memory.
As others have noted they've been found colluding previously, more than once. Even admitted guilt and some people went to jail over it.
And the reason the market is so small is because of players who did as you propose, the DRAM market crashed on them (not due to them but due to broader market dynamics), and they went out of business.
So there is, quite perversely, strong incentive to collude if possible and if not to abide by an unstated agreement to be extremely slow to expand DRAM capacity.
That said...
SK Hynix has two fabs under construction, one set to open later this year. One for 80k wpm, another 360k wpm. A third was recently approved to start construction.
Micro has an overhaul of Fab 6 in Virgina near done and slated to produce first wafers this year. It also has a large expansion in Boise nearly completion for 300k wpm. They're also building a "megafab" site in New York (my guess is >1m wpm) and expanding at their Japanese plants (40k wpm).
Samsung has two under construction, P4 for 100k wpm.
Nanya - historically a secondary player focused only on producing non-leading-edge DRAM is making a play for the leading-edge market with a new fab dedicated to DDR5 and HBM.
It appears they've all decided that the demand is sufficiently sustained that building new fabs is worth doing... but it takes time. If my guess is right Micron is making the largest play with their New York site at 1-1.5m wafers per month. That would give them a large chunk of the market.
(wpm = wafers per month)
>In the past they have not.
Well guess what :) They've done it before, they will do it again.
"To date, five manufacturers have pleaded guilty to their involvement in an international price-fixing conspiracy between July 1, 1998, and June 15, 2002, including Hynix, Infineon, Micron Technology, Samsung, and Elpida.[1]"
[1]https://en.wikipedia.org/wiki/DRAM_industry_price_fixing
Wasn't that bad for business last time? I could see them erring on slower build up because of how it went before, if they're not sure how long this demand will last especially
1 reply →
There are several Chinese fabs that they could contract out production to. In fact that's exactly what Apple tried to do, before the U.S. government went full protectionist and added the two memory manufacturers to the banned imports list. There's also the Texas Instruments fab that's underutilized right now. The extra capacity exists, it's just Micro and SK Hynix are throwing their money around to stifle anything that could jeopardize their spike in profits that are historic not only for their industry, but for manufacturing as a whole.
I didn't say the build out time was months.
I said:
> the test isn't "how much is price going up" it's "how aggressively are the RAM producers expanding supply production"
Large barriers to entry are anathema to competitive markets, so the conclusion here is still that firms are benefitting from the lack of a competitive market.
Memory fabs take years to build, they cost a lot and there is no guarantee that the demand will stay as high years in the future. It's all very complex.
And yet, memory manufacturers have been caught (in legal cases and fined) many times to collide and keep prices high artificially in the past.
I'm curious what the limiting factor is for "years not months" when building these fabs. DRAM is a commodity, there are only threeish major manufacturers, all have huge amounts of capital, multiple nations bend over backwards for new semiconductor production projects, and there seems to be unlimited money going into purchasing these things.
Even when it comes to manufacturing the tooling/testing infrastructure, it's just a question of money aiui.
It's not "just a question of money", time is absolutely a factor. Getting nine women pregnant doesn't give you a baby in a month.